‘Budget 2016 has all the strategies to get Nigeria out of recession’

That Nigeria’s economy is in recession is no longer news; what is perhaps of concern to the citizens now is how the country can get out of it and get back on the path of growth. Dr. Boniface Chizea, a seasoned economist and Managing Director/Chief Executive Officer of Lagos-based BIC Consultancy Services, argues that, among other things, quick implementation of the capital expenditure component of the 2016 budget to kick-start productivity in the economy, growing the tax revenue, providing more targeted funds at concessionary interest rates to key sectors of the economy, and putting purchasing power back into the hands of workers are the way to go. He spoke to CHUKS OLUIGBO, assistant editor.

In specific terms, how do you think Nigeria can come out of the current economic recession? What needs to be done right now?
To come out of the ravaging recession, all that is needed to be done is all on the cards and well-articulated. Budget 2016 which is not being faithfully implemented had all that it takes not to have gotten into the recession in the first place, or rather now that we have recession staring us on the face, it has the strategies to get us out of the recession. The problem has been that we have been delinquent in implementing the budget as has been the case with several budgets for a long time now. It is good that the fiscal authorities are belatedly coming to accept what we have preached all along, that for you to avoid recession all that is needed is for you to deliberately activate productivity by, for instance, implementing the social programmes in the budget, such as the meal a day at school, the conditional money transfer to the unemployed, and the proposed teacher graduate employment, etc. And still on the budget, we for once in a long time projected capital expenditure that amounted to 30 percent of the budget. But we have just been informed that some initial releases of N400 billion have just been made and nobody knows how long it will take for the expenditure to have been effected because of the structural impediments arising from adhering to the procedures to be adopted as outlined in the Public Procurement Act. This probably explains why the executive has asked for emergency powers, which has our sympathy, to hasten up things as we do not at this critical point in time have the luxury of delay occasioned by observing diligently some of the stipulations of this Act.
We must kick-start quick implementation of the capital expenditure included in the budget to kick-start productivity in the economy. We must also make all efforts to grow the tax revenue. In most other economies, recurrent expenditure is funded by revenue accruing from taxation and sundry tariffs. But we must resist the temptation to increase the tax rate. That would be counter to the mindset that would inform exit from the recession. What is required is to broaden the tax net to capture those who have not been paying taxes, particularly in the informal sectors of the economy. But as we want to augment tax revenue, we must avoid any additional taxes, such as the proposed 9 percent communication levy or increases of any form that would compound the misery index in the land. For instance, we do not know if the proposed fees increase at unity schools has been effected. We must deliberately avoid putting more burdens on the citizenry through such increases.
If you have a recession, and as in the Nigerian situation, with rising rate of inflation which means that the situation qualifies as stagflation, you cannot afford to worsen the misery index by not paying salaries as and when due. But what do you have in Nigeria today? According to information available, about 28 states in the country are delinquent with the payment of salaries of workers. What is even more surprising is that some of the oil producing states, which enjoy additional allocation from the Federation Account due to the derivation policy, are also counted amongst such states which have not paid salaries for months. You wonder how the executives expect any manner of productivity from workers that have not been paid their salaries! Therefore, one of the strategies to guarantee the reflation of the economy is to put purchasing power back into the hands of workers so that in the process we can kick-start the activation of idle capacity, boost productivity and ensure that citizens are kept on their jobs and possibly make demand-driven recruitments, thereby impacting the worrisome unemployment situation. As we discuss this, it is even more unconscionable to forget pensioners who have given their best days in the service of this country by also not paying pensioners as and when due. One thought that the recent pension reform was aimed at ameliorating this dire situation as it was expected that the pension scheme would be private-sector driven and therefore the issue of unfunded pension accounts were supposed to be a thing of the past. It would appear that this expectation is yet to materialize as we still witness protest by pensioners who have not been paid for several months. We must prioritize the payment of the pensions as part of the strategies to exit the recession. This is not the time to allow any company to fold up. What is happening in the aviation industry must be checkmated. The authorities must deliberately act to avoid the grounding of any airline with the loss of jobs which would result. All attempts must be made to ensure that people are kept at their duty posts. And that we get more people off the unemployment queues even if by deliberately embarking on public works programmes; engage workers to sweep the streets and markets, clearing of drainages, etc., or back to land programme as is being implemented in some of the states of the federation.
In response to the prevalent high interest environment, we must intensify efforts in the direction of providing more targeted funds at concessionary interest rates, such as we have for the Small and Medium Scale Enterprises, the aviation industry, the power sector, the Graduate Internship Scheme for budding entrepreneurs, the Anchor borrowers scheme for the growing of rice, etc., and ensure that deliberate steps are taken to make such funds readily accessible. It is commendable how the Central Bank in order to facilitate the Graduate Internship Scheme accepted for collateral certificates and diplomas. We need to adopt such approach to ensure that such targeted funds are not simply there in name without anyone being in position to access them.

Assuming all the right policies come in place today, how much longer might Nigerians wait before they begin to see signs of recovery?
Signs of recovery would be visible instantly if you put some of the social programmes in place. Could you envisage what impact a meal a day at school would have in terms of engaging workers to work on the platform sourcing food items from farmers and the market, and the enthusiasm of school children, particularly those from poor homes, who will be looking forward to one good meal a day and therefore can no longer resist the attraction and allure of school! If you pay backlog of salaries, and whilst we at it pay government contractors some of who have been owed for some years for jobs they have executed, the impact would be fast and sudden. This is why most of the strategies we have discussed here are regarded as quick fixes to get the country out of recession in double quick time.

Many analysts and Nigerians in general had thought the N6.06trn 2016 budget would have reflationary impact on the economy, but the reverse has been the case as it appears the budget is not being funded, raising questions regarding what is being done with the over N3trn said to have been saved from TSA implementation and the $9bn said to have been recovered from looted funds. What’s your thought on this?
Budget 2016 was deliberately tagged reflationary budget because of the size of the budget, the capital component of the budget and the extent of deficit. And it was the expectation that it was custom made to postpone the recession. But all this could not happen because as usual we spent time doing other things instead of implementing the budget. Even at the start of the last quarter of the budget calendar, we are still consumed with accusations of budget padding. And what is sometimes difficult to fathom is the often-heard claim to the effect that there is no money. But we have a budget which included a borrowing plan. If we implement the budget, all this cry of lack of funds would disappear. The budget took time to envisage what amount would be borrowed locally as opposed to what the country will borrow overseas. But until lately we are still discussing approval to borrow and from which source. This is why some of us have argued that we do not have to look far for strategies to get the country out of recession as these strategies are well captured in the budget. We celebrated the Treasury Single Account as a strategy to reduce abuse associated with the lodgement of government funds with the banks and in the process we have sanitized a whopping amount of N3 trillion sitting in an account with the Central Bank. In this era of recession whereby we are looking forward to injecting money into the financial system, it is most ill-advised to continue to keep such a humongous sum of money in an idle account. We must quickly move to inject such funds into the banking sector to enable the banks to resume the playing of the important financial intermediation role, taking whatever steps is deemed necessary to avoid the erstwhile abuse which resulted to the adoption of the scheme in the first place.

CHUKS OLUIGBO